Driven to Distraction: Extraneous Events and Underreaction to Earnings News

  title={Driven to Distraction: Extraneous Events and Underreaction to Earnings News},
  author={David Hirshleifer and Sonya Seongyeon Lim and Siew Hong Teoh},
  journal={Capital Markets: Market Efficiency},
Recent studies propose that limited investor attention causes market underreactions. This paper directly tests this explanation by measuring the information load faced by investors. The "investor distraction hypothesis" holds that extraneous news inhibits market reactions to relevant news. We find that the immediate price and volume reaction to a firm's earnings surprise is much weaker, and post-announcement drift much stronger, when a greater number of same-day earnings announcements are made… 
Media Coverage and Investors’ Attention to Earnings Announcements
Does investors’ inattention contribute to the post-earnings announcement drift? I study this question using media coverage as a proxy for attention. I compare announcements made by the same firm in
Unexpected distractions and investor attention to corporate announcements
We investigate how unexpected distractions affect investors' reactions to corporate earnings announcements. We use a daily news pressure (DNP) index as a proxy for the presence of potential investor
Keeping Your Cool: An Attention Driven Buying Pressure After Earnings News
This paper uses a novel and direct retail investor attention proxy to show that retail investor attention is important for information efficiency around earnings announcements. The main finding is
Social Interaction and Market Reaction to Earnings News
Author(s): Wang, Qiguang | Advisor(s): Hirshleifer, David | Abstract: This study documents strong effects of social interaction on investors’ attention and interpretations of earnings news. I
Headline Salience and Over-and Underreactions to Earnings
If investors have limited attention, then greater salience of earnings news implies a stronger announcement date return reaction, and a weaker post-earnings announcement drift (PEAD) or reversal
Attention to Market Information and Underreaction to Earnings on Market Moving Days
Post-earnings announcement drift (PEAD) is stronger in firms that release earnings on days when market returns are higher in magnitude. This drift remains robust after controlling for previously
Continuous Disclosure Requirements and the Investor Distraction Hypothesis
The magnitude of the short term market reaction to news announcements is adversely affected by the total number of announcements that day. We argue that the total number of announcements creates a
Total Attention: The Effect of Macroeconomic News on Market Reaction to Earnings News
We show evidence that consistent with category-learning behavior, investors allocate more attention to macroeconomic news than to firm-specific news, such as earnings announcements. Despite the
Limited Investor Attention and Stock Market Misreactions to Accounting Information
We provide a model in which a single psychological constraint, limited investor attention, explains both under- and over-reaction to different earnings components. Investor neglect of information in


The Disposition E ff ect and Underreaction to News
This paper tests whether the “disposition effect,” that is the tendency of investors to ride losses and realize gains, induces “underreaction” to news, leading to return predictability. I use data on
Investor Attention: Overconfidence and Category Learning
Investor attention , overconfidence and category learning
Motivated by psychological evidence that attention is a scarce cognitive resource, we model investors’ attention allocation in learning and study the effects of this on asset-price dynamics. We show
Investor Inattention, Firm Reaction, and Friday Earnings Announcements
Do firms release news strategically in response to investor inattention? We consider news about earnings and analyze the response of returns to announcements on Friday and other weekdays. Friday
Around-the-Clock Media Coverage and the Timing of Earnings Announcements
We reexamine the descriptive ability of the conventional wisdom that earnings announcements made after trading and on Friday are dominated by bad news in light of the 24/7 media coverage and other
All that Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors
We test and confirm the hypothesis that individual investors are net buyers of attention-grabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with
Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades
ABSTRACT: This study tests whether nai¨ve trading by individual investors, or some class of individual investors, causes post-earnings announcement drift (PEAD). Inconsistent with the individual
This study seeks to discriminate between competing explanations of "post-earnings-announcement drift." Ball and Brown [1968] were the first to note that even after earnings are announced, estimated
Earnings Surprises, Growth Expectations, and Stock Returns or Don't Let an Earnings Torpedo Sink Your Portfolio
It is shown that while growth stocks are at least as likely to announce negative earnings surprises as positive earnings surprises, they exhibit an asymmetrically large negative price response tonegative earnings surprises.
Investor Reaction to Salient News in Closed-End Country Funds
We provide a model of closed-end fund pricing which includes investors who do not form expectations correctly and allows for salient country-specific news to affect this expectation formation